Rental agreement in Costa Rica: what it must say, what is void

This guide explains what a residential lease in Costa Rica must say, how long it lasts, how the rent is adjusted and which clauses are void even when signed. It is written for anyone looking for homes for rent in Costa Rica and for owners about to let their property: the law protects tenants with rules that no contract can weaken.

What must a residential lease say?

In Costa Rica, renting a house or an apartment has its own law. Under articles 2, 3 and 4 of the Ley General de Arrendamientos Urbanos y Suburbanos (Law 7527), that law governs every lease of real property, oral or written; it is a public-order law and the rights it gives tenants cannot be waived. This means a spoken agreement is also a lease, and the law's rules apply even if no one wrote them down.

Because the law also covers oral agreements, the written document is not what creates the lease, but it is the best proof of what was agreed. That is why we always recommend a written contract, signed by both parties, with a copy for each. A good lease puts in writing what is usually disputed later: who the parties are, what is being rented, for how much, in which currency, from when and under what rules of use. The table below summarises the elements worth including and why each one matters.

Attach dated photos of the home's condition and the water and electricity meter readings from handover day to the contract. They are not a legal requirement, but they settle in minutes disputes that would otherwise turn into long claims over damage, cleaning or consumption that no one remembers precisely.

How long does the lease last and when can each party end it?

The term is the rule that most surprises first-time renters. Under Article 70 of Law 7527, a lease cannot last less than 3 years: if it sets a shorter term or none at all, it is deemed agreed for 3 years, counted from the day the tenant receives the property. A contract that says «one year» is read, for legal purposes, as a 3-year lease, and the tenant may stay that long if he meets his obligations.

Renewal also happens without signing anything new. Article 71 of that law provides that if the landlord does not notify the tenant, at least 3 months before the term ends, that the lease will not be renewed, it is extended for a new 3-year period on the same terms. For the owner, the date of that notice is the most important one in the contract; for the tenant, the landlord's silence means the lease continues on the same terms.

The tenant has more flexibility to leave. Under Article 72 of Law 7527, unless otherwise agreed in writing, the tenant may end the lease by giving the landlord 3 months' notice, without changing the other obligations the lease created. In other words, he must pay rent and utilities until he moves out and return the home in the agreed condition. If the contract includes a different written clause on early exit, read it carefully before signing, because the law gives that agreement effect.

1. 1
   Check whether the contract includes a written agreement on early exit.
2. 2
   Send the notice to the landlord in writing, 3 months in advance, to the notice address in the contract.
3. 3
   Keep proof that the landlord received the notice.
4. 4
   Pay rent and utilities until the day you move out.
5. 5
   Hand over the home with dated photos and the meter readings.

Which clauses are void even when signed?

Because the law is a public-order law, a clause that contradicts its mandatory rules is treated as unwritten, as articles 2, 3 and 4 of Law 7527 establish. The lease remains in force; what disappears is the clause. Signing it does not make it valid, because the rights the law gives tenants cannot be waived. In practice, these are the clauses that most often clash with the law:

• A term shorter than 3 years: the lease is deemed agreed for 3 years, as Article 70 provides.
• An annual increase above what is allowed: under articles 67 and 68 of Law 7527, any increase above what the law allows is null and void.
• Demanding several months in advance: Article 58 of that law prevents the landlord, in a residential lease, from demanding more than one month's rent in advance.
• An annual increase in a lease agreed in US dollars: the law keeps the agreed amount for the whole term, with no right to an increase.
• A general waiver by the tenant of the rights the law gives him: those rights cannot be waived.

Not every inconvenient clause is void. What is treated as unwritten is what contradicts a mandatory rule of the law; house rules that the contract sets out clearly, in matters the law does not regulate in a mandatory way, bind both parties. If you have doubts about a specific clause, consult a lawyer before signing: clarifying it at the start costs far less than disputing it once the relationship is already strained.

How is rent adjusted each year, in colones or in US dollars?

In a residential lease in colones, the rent is updated at the end of each year of the contract. Under Article 67 of Law 7527, if inflation over the previous 12 months was 10% or less, the landlord may raise it by up to that same inflation rate, measured with INEC's consumer price index, unless there is an agreement more favourable to the tenant. The rate is a ceiling, not an obligation: the owner may raise it by less or not at all.

If inflation over the previous 12 months exceeds 10%, the same Article 67 tasks MIVAH with setting the percentage increase, which cannot be lower than that 10% nor higher than the annual inflation rate. The increase also follows a procedure: under articles 67 and 68 of that law, it applies from the payment period after the landlord notifies the tenant, together with INEC's certification or a certified copy of the publication in the official gazette.

1. 1
   Wait until the end of the contract year, counted from the handover of the property.
2. 2
   Check inflation over the previous 12 months according to INEC.
3. 3
   Notify the tenant of the new amount, with INEC's certification or the certified copy of the official publication.
4. 4
   Charge the new amount from the payment period following the notice.

There is an exception for older leases. Under the sole transitional provision of Law 9354, the current rules on residential rent increases apply since June 2016, and leases already in force at that time are governed by the previous rules. If your lease was signed before that date and is still in force, seek advice before calculating or accepting an increase.

Rent in US dollars works differently. Under Article 67 of Law 7527, if the rent for a home was agreed in a foreign currency, for example US dollars, the agreed amount stays the same for the whole term of the contract, with no right to an increase. And Article 57 of that law lets the tenant pay it in colones, at the Banco Central de Costa Rica selling exchange rate in force on the payment date. The tenant bears the exchange-rate risk; the owner gets no annual increase for the duration of the term.

If you are comparing options among cheap homes for rent in Costa Rica, consider the currency as well as the amount: rent in colones may rise each year within the legal limit, while rent in US dollars stays fixed in that currency during the term, even though what you pay in colones changes with the exchange rate.

Who pays the utilities and how is rent paid?

The question of utilities is settled, first and foremost, in the contract. In common practice in Costa Rica, the tenant pays for the water, electricity, phone and internet consumed in the home he occupies. Even so, do not take it for granted: write each service and who pays it into the contract, including the maintenance fee if the house is in a condominium and municipal rubbish collection.

It is also worth recording the meter readings on handover day and on move-out day, and agreeing whether the bills stay in the owner's name or are transferred to the tenant. If they stay in the owner's name, ask for the contract to state how each monthly payment is proven, so that a utility debt does not appear months after move-out.

As for paying rent, Article 58 of Law 7527 provides that it is paid monthly unless otherwise agreed; that the tenant may pay within 7 calendar days after each period falls due; and that, in a residential lease, the landlord cannot demand more than one month's rent in advance. Always ask for a receipt or pay by bank transfer, so there is a record of every payment.

What we would do before signing a lease

• We would always sign in writing, with the term counted from handover and an inventory with dated photos.
• We would choose the currency knowing what it implies: in colones there is an annual increase with a legal cap; in US dollars, a fixed amount for the term and exchange-rate risk.
• As owners, we would note the date of the non-renewal notice, 3 months before the term ends.
• We would compare renting with buying: home prices in Costa Rica and the supply of homes for sale in Costa Rica help show whether renting still makes sense.
• With a tight budget to buy, we would look at cheap homes for sale in Costa Rica before committing to 3 years of renting.

Frequently asked questions

Can a rented house be sublet?

Only with permission. Under Article 78 of Law 7527, the tenant cannot sublet or assign the lease without the landlord's express authorisation; if he does, the landlord may seek termination. In addition, the owner's mere tolerance creates no rights for the tenant or third parties until the limitation period runs. If you plan to share the home or rent out a room, ask for authorisation in writing and attach it to the contract.

Which law governs a seasonal rental?

It depends on what is rented and for what. Renting to tourists by the night or the week is non-traditional lodging and has its own law; the ICT's legal office has taken the view that, when the arrangement falls within that law, the rules of Law 7527 do not apply to it. In addition, under Article 7 of Law 7527, that law does not apply to hotels, guesthouses and similar establishments, nor to tourist homes let by the season in areas that the ICT declares suitable for tourism through a resolution published in the official gazette. Outside those cases, if someone rents the house to live in it, Law 7527 governs, with its minimum term and its rules on increases. Before signing a short rental, ask what type of contract it is and, if in doubt, check it with a lawyer.

Is an oral lease valid?

Yes. As articles 2, 3 and 4 of Law 7527 establish, the law governs every lease, oral or written, and tenants' rights cannot be waived. A spoken agreement therefore has the same minimum term of 3 years from handover and the same rules on increases. The problem is proof: without a document, showing the amount, the currency or who pays the utilities depends on receipts, transfers and witnesses.

This guide summarises the rules and practice of residential leasing in Costa Rica and does not replace the advice of a lawyer or a notary. When facing a specific contract, a dispute or a doubtful clause, consult a professional before signing, stopping payment or handing back the home.